By Adedapo Adesanya
With the rising concerns over the implementation of the new electricity tariffs across the country, a report has shown that the Nigerian power sector is responsible for over N100 billion non-performing loans in the country.
According to the data obtained from the National Bureau of Statistics (NBS), the power sector ranks among the sectors with the largest non-performing loans in the banking sector.
As at the end of April 2019, the total loan portfolio by domestic and foreign components was put at N15.4 trillion, while the Non-Performing Loans (NPLs) stood at N1.67 trillion.
Non-performing loans constitute one of the most serious liquidity barriers facing the Nigerian banking sector. Bank loans are regarded as risk assets because the monies advanced as loans by the banks belong to depositors. The risk arises in the event of massive defaults. Depositors’ monies could become available on-demand.
The huge amount of NPLs in the economy has gained wide-spread criticism. This has also become a cause of concern for commercial banks whose stability in the face of reeling economic downturns is uncertain.
On Thursday, the Federal Government through the Nigerian Electricity Regulatory Commission (NERC) announced an increase in tariffs payable by power consumers across the country with effect from 2020.
While Nigerians have raised several concerns, the tariff review appears to be the only measure that will encourage investors to bring in the largely needed investments which have been lacking in the sector.
This has since attracted wide criticisms from Nigerians, power sector stakeholders see this as unavoidable due to cash constraint and liquidity crises in the face of the huge non-performing loans.
In a bid to make up for the shortfall experienced in the sector, the Federal Government on Wednesday, September 23, 2019, approved the disbursement of N600 billion intervention fund into the country’s electricity market.
